All the usual disclaimers apply . . in short, do this at your own risk, blah blah blah. Also, people have different methods of doing this job, and I have mine.

Symptoms of bad trailing arm bushings include side movement of the rear end under acceleration, general looseness of the rear over bumps, and abnormal tire wear. These bushings will start wearing out after about 50,000mi, give or take. As you'll see in this DIY, I made a special puller/press tool for dealing with this stubborn bushing, but it wasn't good enough for removal. So I had to go butcher style, which is an option many choose instead of paying out your ass for the tool. I think the tool is like $125 or higher, or you can rent it from koalamotorsport.com for $80 plus a $500 deposit. Photo of my puller:

Anyhow, because the trailing arms are somewhat connected together via the sway bar, I reasoned that they'll come down lower for servicing if I disconnected both at the same time instead of doing one side, then the other. Start by placing the rear on jackstands, and remove the rear wheels. Disconnect the brake line bracket off the trailing arms by removing the two 10mm bolts:

Start removing the 18mm bracket (or 'console', according to BMW) bolts which hold the trailing arm to the body, but leave one bolt connected. Long arm ratchets work best, and will provide you with good leverage, and a 6" extension allows you to turn the ratchet below the skirt. Inset view shows bolt positions. Once you take off the bolts, they will leave 'bolt rings' of dirt on the bracket- you'll need these marks to relocate the bolts during assembly so you can get it close to correct rear alignment.

Support the trailing arm with a floorjack and remove the final bolt. Careful- if you don 't support it, it will come down pretty quickly from the force of the coil spring, particularly with stock springs.

This photo shows the arm down off the body. You'll achieve the lowest point when both arms are removed, since they're connected by the sway bar.

Remove the center through bolt to release the bracket off the arm. This is particularly hard, and again, long ratchets will help, or fit a pipe over the handle of your ratchet to extend it. Place a floorjack under the arm to help stabilize it.

Measure the gap, if any, between the housing and the bushing flange. It's typically about 1/16" on earlier model E36's, and mine measured differently for the the left and right. On later models, there is no gap. If you have a gap, you need to leave the same distance when installing the new bushings.

Okay, here's where everything went bad for me. The tool I made wouldn't pull the bushing out, and one leg (indicated by blue arrow) kept slipping off the housing. GAH!!!

Plan B, ghetto mode . . drill the crap out of the rubber bushing, pop the core out (inset), and sawzall the outer metal casing of the bushing.

I was working by myself so I couldn't get a photo while using the sawzall. Be very careful not to cut into the housing! You can also use a hacksaw, it'll take a little longer. In fact, if you've never used a sawzall before, use a hacksaw, so you'll have better control over your cut. Once you cut the outer casing, you can pry it all out (photo left). Photo on right is what the housing looks like. Clean it with a rag or Scotchbrite.

A shot of the bushing after removal, and the new bushing in the forefront for comparison. Note the sawzall cut marked by the blue arrow.

Pressing the new bushing in. Before proceeding, note the orientation of the bushing's flange notches (inset 1). The notch points toward the hole in the arm below the housing. Set that orientation now, because once the bushing goes in you can't turn it. The housing is tapered from the outside in, so these bushings only go one way out and one way in. Press it in by pushing on the outer housing, not the center core (hence the depression in the center of the press tool to avoid touching the bushing core). Some people use Circolight or an equivalent anti-sieze coating to ease the bushing in, but I used dish detergent and water. Some people freeze the bushings and get mixed results, I doubt it helps. Thay go in easier than they come out anyway. Stop when you've replaced the gap you measured earlier, if any (inset 2).

Don't worry if the bushing starts going in cockeyed, it will straighten out once you're halfway in. Reinstall the bracket, and tighten it just enough so that swiveling it gives you some resistance.

Grab a straight edge, and rest it under the installed bracket's flange (see photo). Line the bracket up so the straight edge ends up about 8mm above the centerpoint of the wheel hub. This ensures that there is no preload on the bushing at normal ride height. There is an alignment tool for this procedure, but I didn't find it necessary to procure. Once you have that set, torque the through bolt to 81 ft-lbs.

Almost there . . lift the trailing arm up into the body with a floorjack (some help from a partner would be good, but I was able to do it alone). Replace the bolts hand tight with a wrench, then back them out just a bit. Get a rubber mallet and tap the arm and bracket till you line up the bolts with the dirt rings, then torque them to 57 ft-lbs. The closer you get this, the better your wheel alignment will be, so take your time. But you should still get a rear wheel alignment sometime soon afterwards.

Now reconnect the brake line brackets with the 10mm bolts hand tight with a ratchet. Don't overtighten- they're easy to strip. Throw your wheels back on, and go for a spin! The rear will feel much tighter and more responsive. Don't forget to get an alignment.

The writeup seems really complicated, but I wanted to convey as much detail as possible. In the end, remember all you're really doing is replacing a stupid bushing. This took me 6hrs by myself, which includes a very long wait for the sawzall to arrive after my puller failed to do its job. But with help from a buddy and proper tools, I'd say this can be done in about 2hrs.

A note on aftermarket shims: if you choose to use them, they just go in the space between the bushing and the bracket/console. Lubricate them before installing or they'll squeak a lot. I opted not to install any, since they really stiffen the handling, and most people don't recommend them for street use. But you can be your own judge on that argument. Hope this writeup helps someone out there

Good question. My research indicates that everyone follows this procedure, including authorized BMW service centers. So I did it too, but no one seems to know why. It probably affects the alignment somehow. My best guess is that on earlier models, the width of the housing on the trailing arms were not up to spec. I wish I had access to a later model to compare.

You don't know how glad I am to find this post. I am picking up a 320 Cabrio this week and it has the left rear bushing completely worn out. I test drove the car and it felt like something was loose at the back. Later inspection verified that.

Anybody has the part number for the bushing and most important, whats the dimensions of an appropriate puller?

Any chance the pix for this still exist somewhere? The post now shows the pix as not hosted anywhere.
All the "mechanics" I speak with tell me that the trailing arms have to come completely out to press the bushings out. This seems so much easier and economical.
But the pix would really help!!!

The Trailing Arm bushings and go bad at times as well. The Lateral Stabilizer Rod bushing and fail less often, but can be a possibility? What I do is start tapping around with a large rubbed mallet. Bushings, arms, springs and the exhaust system to try to isolate the noise.It is also possible the rear differential has some play in it. If you can turn the drive shaft a ¼-turn or more before the wheels start to turn, there is excessive play in the rear differential.